OMEX’s Investors Unfazed By A Scathing Short Report
The Street Sweeper, an investment research firm dedicated towards uncovering corporate fraud and other short selling opportunities, published on Monday a scathing report on Odyssey Marine Exploration (NASDAQ: OMEX), a nano-cap deep-ocean exploration company.
According to The Street Sweeper’s Sonya Colberg, the company faces many issues, including a massive cash shortfall, flirting with a delisting order by the Nasdaq exchange, the prospect of a bankruptcy or major stock dilution, among others.
Perhaps most importantly, the company has virtually no cash left. Perhaps this shouldn’t come as a surprise as the company has operated essentially as a hobby as a business line includes salvaging shipwrecks. The company’s streak of annual net losses also dates back to 2005.
Moreover, the company has already sold its exploration boat, headquarters building and shipwreck inventory back in December and is now left with no inventory to sell. As such, OMEX is likely down to its last dollar which means it has two options on the table – neither of which will be shareholder friendly.
The first option would be to obtain financing through convertible shares or list its stock on the over-the-counter-bulletin board and accept its fate as being delisted by the Nasdaq exchange even though it has been in violation of Nasdaq’s minimum listing standards for nearly the longest amount of time permissible.
In fact, to get back into Nasdaq’s compliance requirements, shares would need to rise to $4.65 and stay above that level for 10 consecutive days. This is unlikely to happen since the stock has not closed above $4.39 since April.
Odyssey Marine’s stock traded in positive territory on Monday but Colberg attributed the gains towards stock promoters who were heavily active across chat boards.
Needless to say excessive social media chatter and heightened activity in the chat boards is a red flag for investors. After all, companies with strong prospects and outlooks don’t need to resort to this kind of activity to attract investors’ attention.
The heavy promotional activity is also responsible for the stock’s 32 percent gain since the start of 2016 although shares are down significantly from its 52-week high of $9.36.
“The company appears to be weeks away from major dilution or bankruptcy,” Colberg concluded. “We believe the stock is a zero or pennies, at best.”